Ambarella Q1 2026 Earnings Call Transcript

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May 29, 2025
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Operator

Hello, everyone, and welcome to Ambarella's First Quarter Fiscal Year twenty twenty six Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To participate, you will need to press 11 on your telephone, and you will hear a message advising your hand is raised. To withdraw your question, simply press 11 again.

Operator

Please note this event is being recorded. Now it's my pleasure to turn the call over to the Vice President, Corporate Development, Louis Gerhardy. The floor is yours.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Thank you, Carmen. Good afternoon, and thank you for joining our first quarter fiscal year twenty twenty six financial results conference call. On the call with me today is Doctor. Fermi Wang, President and CEO and John Young, CFO. The primary purpose of today's call is to provide you with information regarding the results for our first quarter of fiscal year twenty twenty six.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

The discussion today and the responses to your questions will contain forward looking statements regarding our projected financial results, financial prospects, market growth and demand for our solutions, among other things. These statements are based on currently available information and subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, our actual results could differ materially from these forward looking statements. We are under no obligation to update these statements. These risks, uncertainties and assumptions as well as other information on potential risk factors that could affect our financial results are more fully described in the documents we file with the SEC.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Before starting the call, I'd like to summarize our investor events scheduled for our second fiscal quarter. On June 3, we'll be participating in Bank of America's Technology Conference in San Francisco. June Seventeen, we'll host Redburn Atlantic's West Coast Bus Tour in Santa Clara. June Eighteen, we'll host Trivariant Research and NH Investment Securities bus tour in Santa Clara. And June '25, we'll be visiting Baltimore, Boston and New York City on a non deal roadshow.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Access to our first quarter fiscal year twenty twenty six results press release, transcripts, historical results and SEC filings as well as a replay of today's call can be found on the Investor Relations page of our website. The content of today's call as well as the materials posted on our website are Ambrell's property and cannot be reproduced or transcribed without our prior written consent. Fermi will now provide a business update for the quarter. John will review the financial results and outlook, then we'll be available for your questions. Fermi?

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Thank you, Luis, and good afternoon. Thank you for joining us for our call today. We had an excellent start to the year with the first quarter revenue of $85,900,000 to the upper half of of our guidance due to the continued strength in our h AI business. Both our five nanometer CV five and CV seven product family, as well as our 10 nanometer CV two product families contributed to the revenue growth and our average selling price, continue to increase as we capture more value per design win. AGI revenue, which we define as a product that integrates one of our proprietary deep learning AI accelerators, was more than 75% of our q one revenue.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

And this represents the fourth consecutive quarter of a record AI revenue. This achievement demonstrates the execution of our h AI strategy in the face of volatile market. During the first quarter, IoT applications increased to mid single digit sequentially and now represent about three quarters of our total revenue. With our automotive business declined low single digits sequentially, although automotive revenue was up more than 20% on a year over year basis. In our February 26 earning call, we provided a fiscal twenty twenty six revenue growth estimate in the mid to high teens or approximately $327,000,000 to $339,000,000.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

With some conservative building to our second half outlook due to the geopolitical uncertainty. Although the geopolitical uncertainty remains high, we are increasing our fiscal twenty twenty six revenue growth estimate to the range of 19% to 25% or approximately $348,000,000 at the midpoint. While we continue to expect that we will not face a material direct impact from the current tariffs, given the uncertainty of of indirect impact, our larger than normal range of guidance reflects our conservatism. We are confident in the long term drivers of our h AI strategy and the business remain fully impact. Multiple factors are driving our optimism for the h AI market, including my recent discussions with customers, the representative customer engagements I will discuss later in the call, as well as evolution evolution of our h AI serviceable available market.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Our SAM is comprised of more than 20 different automotive and IoT h AI applications with a five year compounded annual revenue growth rate in the high teens, reaching almost $13,000,000,000 in fiscal twenty thirty one. In the past, a vast majority of our revenue and our same opportunity originated from the edge endpoint market, all the terminal device in a in a network. But our new analyst indicates some expansion in the edge infrastructure, all the layers of a the layer of a network where data from multiple endpoints is aggregated the incremental advanced AI features and the service such as a multimodal vision language model vision language and the reasoning models can be supported. We are already addressing the edge infrastructure market with the n one family, and we are now developing a new AI SoC product family to enhance our edge AI infrastructure road map. By leveraging the silicon architecture and software investment in our low power and scalable third generation AI accelerator, we are able to efficiently extend our reach.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Over the next few quarter quarters, we will be describing some of the age infrastructure applications we are targeting in more detail. In April, I attended the IAC West Security Show and met with key customers and partners. Ambarella demonstrated its leadership in Gen AI at the age with 18 product demonstration, including the latest Gen AI and the Vision AI capabilities. And I was very pleased with the high level of a customer interest and design activities around our advanced AI products. The demonstrations highlight Ambarella's ability to enable scalable, high performance reasoning and vision AI applications with leveraging our third generation AI accelerator, which now supports most of the leading gen AI models from 500,000,000 millions to 34,000,000,000 parameters.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

We demonstrated deep six gen models running on our products at the three different price perform performance points, including CV 75, CV 72, and n one six five five processors. These demos, including advanced multistream video analysis, exemplify our how we are pushing the boundaries of a real time AI powered security and analytics by running state of art vision language models for both endpoint and on prime infrastructure. I will now talk about some of our customer product introductions in the quarter. During the quarter, leading enterprise security camera company introduced two new products based on our CV 72, offering very high resolution and advanced AI analytics. A third product, a wearable device supporting multiple modalities was also introduced to the market, and this first of a kind product is based on our a six l m video processor.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

As I described earlier, we are seeing increased traction in the h AI market beyond our core enterprise and whole security business. This quarter, IoT edge examples that demanding demanding our AI technology, including 360 degree portable video cameras, cyclist cameras, industrial automation, and enterprise video conferencing. In a portable video camera market, market leader Insta360 introduces a flagship model of three three sixty degree xFi camera based on Ambarella's five nanometer CV five. The xFi offers eight k video with advanced AI based image processing. Also in the IoT market, Xiaomi announced its VarioView Halide camera for cyclists based on our h 32 video processors.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

In the enterprise IoT industrial automation market, Huawei announced its r 5,000 series of machine vision co coder reader co readers based on our third generation AI accelerator. The five nanometer CV 75 enables the system to read up to 90 codes per second. Also in the enterprise IoT, Norway based hardly introduced a new category of multi camera video conferencing products as of the integrated system, Europe Europe Expedition. Harlow is new c one video bar is a part of a collaboration with technology giant, the logo. The end of the event system is based on our five nanometer CV 72 with 20 times the AI performance of previous generation systems.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

In our automotive safety and ADAS business, this quarter, we are disclosing wins in China, Japan, Korea, and The US. A leading Japanese OEM will utilize our CV 25 SoC in a data logger application. With a CV 25 supporting both human viewing and data analytics. The up the project is supported by a major tier one in Japan with production scheduled to begin this year. Also in Japan, minority leading Japanese OEM is utilizing CV 25 for multi camera system providing in cabin recording and the viewing functions with production schedule for our current fiscal year.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

During the second quarter, Zika introduced its double double zero seven GT electric vehicle featuring an interactive intelligent beam peeler system with two cameras. Our c 28 enable access control based on face ID as well as in cabin monitoring. Thinkware, a leading South South Korea provider over smart car information technologies, has entered production with with Harmony, a dual camera recorder based on c d 25 supporting ADAS features such as full collision warning, then departure warning, and the security monitor. And in the commercial fleet telematics market, US based the road easy introduces r z one featuring the dual dual view camera based on our CV 25. The r z one capture clear road and cutting footage to improve free safety and accountability with the integrated h AI identifying risk like distracted driving, phone usage, or tailgating.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

As you can see from this representative engagements, security remains an important growth market for us. But we are seeing opportunities in numerous other AGAI applications with customers in both the auto and the IoT market evaluating and adopting our AI SOCs. As many of you know, roughly five years ago, AGAI originated in an enterprise security camera market, and we were quick to lead the market. Today, continue to lead the security edge AI market, and we are successfully leveraging our AI portfolio and the market know how into new application verticals. In fact, security is less than half our total revenue today and to and today's announcement are just a subset of new application we see emerging.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Our investment in technology and products is driving today's revenue growth and our future revenue growth opportunities. Our AGAI products address the mega trends of safety and security, but also automation which enables end user productivity to be improved and or enables entirely new revenue streams across many markets. While it is still early, AI is fighting its way to the edge. It's not just a data center or hyperscaler opportunity anymore. Ambarella is the leader in the h in h AI with more than 32,000,000 h AI processors shipped on a cumulative basis.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

We are the established a HAI technology provider who's uniquely focused on focus and the position for the rapidly evolving HAI market. We continue the pace of rapid innovation. Our product portfolio and the roadmap are highly differentiated and offer the flexibility and scalability to target increasingly diverse applications. Both enterprise and consumer driven markets and across each endpoints as well as each infrastructure. As I wrap up today, I want to reiterate the important points we shared today.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

One, we deliver strong q one results with similar strengths projected into q two. '2, we increase our fiscal twenty twenty six guidance while maintaining a conservative second half status. Three, our higher value, higher ASP products are seeing strong momentum. Four, we have a strong same outlook with the new HAM markets in development. Five, we are the established AGI market leader who is innovating at the right pace.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Of course, the geopolitical uncertainty can be a distraction, but to deal with it, I feel it is important to remain agile and to be prepared for short term surprises and to focus on what we can control. While most importantly, continuing investment in innovation and market development that is most critical for our success. Financially, while we have generated positive free cash flow for sixteen consecutive years, our goal is to develop the technology products and the customers that result in positive earned leverage and growth in our free cash flow. With that, John will now discuss the Q1 results and the Q2 outlook in more detail.

John Young
John Young
Chief Financial Officer at Ambarella

Thank you, Fermi. I'll now review the financial highlights for the first quarter fiscal year twenty twenty six ending 04/30/2025. I will also provide a financial outlook for our second quarter of fiscal year twenty twenty six ending 07/31/2025. I will be discussing non GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non GAAP results. For non GAAP reporting, we have eliminated stock based compensation expense along with acquisition related costs adjusted for the impact of taxes.

John Young
John Young
Chief Financial Officer at Ambarella

For fiscal Q1, revenue was $85,900,000 above the midpoint of our prior guidance range, up 2.2% from the prior quarter and up 57.6% year over year. Sequentially, automotive revenue declined in the low single digits and IoT increased in the mid single digits. Non GAAP gross margin for fiscal Q1 was 62%, slightly above the midpoint of our prior guidance range due to a favorable product mix. Non GAAP operating expense in Q1 was $51,800,000 slightly above the midpoint of our prior guidance range of 50,000,000 to $53,000,000 due in part to higher engineering costs on new and existing chip development projects. Q1 net interest and other income was $2,200,000 comparing to our prior guidance of $1,800,000 The increase was primarily from higher other income.

John Young
John Young
Chief Financial Officer at Ambarella

Q1 non GAAP tax provision was approximately $600,000 We reported a non GAAP net profit of $3,000,000 or zero seven dollars of earnings per diluted share in Q1. Now I will turn to our balance sheet and cash flow. Fiscal Q1 cash and marketable securities reached $259,400,000 increasing $9,100,000 from the prior quarter and $56,000,000 from the same quarter a year ago. Increased cash and marketable securities benefited primarily from working capital improvements associated with increased revenue during the quarter. Receivables days sales outstanding decreased from thirty three days in the prior quarter to thirty one days, while days of inventory increased one day to ninety eight days.

John Young
John Young
Chief Financial Officer at Ambarella

Compared to the prior quarter, our inventory dollars increased 14% to support our customers' strong demand outlook for our products. Operating cash inflow was $14,800,000 for the quarter. Capital expenditures for tangible and intangible assets were $4,600,000 for the quarter. Free cash flow was $10,200,000 for the quarter. During the second quarter of fiscal year twenty twenty six, Ambarella's Board of Directors approved an extension of the current share repurchase program for an additional twelve months ending 06/30/2026.

John Young
John Young
Chief Financial Officer at Ambarella

During the first quarter, we purchased 24,152 shares of our stock for a total consideration of approximately $1,000,000 As of today, there's approximately $48,000,000 available under our repurchase authorization. We had one logistics company representing 10% or more of our revenue. WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 63.1% of revenue for the quarter. I'll now discuss the outlook for the second quarter of fiscal year twenty twenty six. Demand for our Edge AI inference processors remains strong.

John Young
John Young
Chief Financial Officer at Ambarella

We anticipate fiscal Q2 revenue in the range of $86,000,000 to $94,000,000 or $90,000,000 at the midpoint. We expect mid single digit sequential revenue growth in IoT applications with auto revenue expected to be slightly up versus the prior quarter. For fiscal six, we anticipate a revenue growth range of 19% to 25%. We expect fiscal Q2 non GAAP gross margin to be in the range of 60.5% to 62%. We expect non GAAP operating expenses in the second quarter to be in the range of $52,500,000 to $55,500,000 with the increase compared to Q1 driven by new product development costs, including a new AI SoC addressing the emerging IoT edge infrastructure opportunities described earlier by Fermi.

John Young
John Young
Chief Financial Officer at Ambarella

We also anticipate a weaker U. S. Dollar to have a moderately unfavorable impact on our operating expenses in the second quarter. We estimate net interest and other income to be approximately $1,800,000 our non GAAP tax expense to be approximately $800,000 and our diluted share count to be approximately 42,600,000.0 shares. Thank you for joining our call today.

John Young
John Young
Chief Financial Officer at Ambarella

And with that, I will turn the call over to the operator for questions.

Operator

Thank you so much. As a reminder, that is star one one if you do have a question and wait for your name to be announced. To remove yourself, It comes from the line of Christopher Rolland with Susquehanna. Please proceed.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

Hey, guys. Congrats on the quarter and thanks for the question. To get to your full year guide, I just want to make sure I get the moving parts right. It seems like we are taking up our numbers in the first half. But just looking at the sequential growth profile, it looks at least versus prior that the back half, the sequentials are reduced versus our prior.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

And so I was just wondering, has the growth profile actually changed? Is this related to the tariff kind of pull in that you commented on last quarter? So are we taking from the for the are are we adding to first half, but taking from the second? Just what what what are the kind of moving parts in the growth profile for the year?

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Well, first of all, I don't think we're having concerns. At least our current annual guidance doesn't have any concerns about second half strength. While we if you look at the we extend the guidance range. If you look at the the high end of guidance range, we have a regular seasonality and showing a strong second half growth. So it's really about, you know, the there's uncertainty about with the current geopolitical situation.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

I want to build in some con uncertainty in there. So I think we are still high confidence about our second half growth. And, with our visibility in q three, and we're building up the feasibility in q four, I think that, I don't believe what giving any signal that we have a weak second half.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Yeah. Chris, going into this this is Lewis. Going into this call, you know, I think consensus was about 51% in the first half, forty nine percent in the second half. And at the midpoint, I don't think those, you know, percents change much, but the dollar figures, I think, in every quarter would probably be going up a bit. So it's it's another way to think about it.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

But, you know, I'd point out also that, if you're in the upper half of our guidance range, you'd probably end up with seasonality pretty close to normal. So it's really your call. We're just saying it's an uncertain environment. It could happen and play out a lot of different ways.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

Fair enough. Thank you very much for that, Louis. I know you don't guide a few quarters ahead, but would you expect October to be up seasonally? I know January is typically down. But is there any reason to think that that October should be up, overall?

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Think we could help you

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

with the shape, but, you know, as far as you said, not the absolute numbers. And I think it's reasonable to think that that would be, you know, positive sequential number. And it's probably reasonable to expect, you know, q four to be down sequentially. That's all we can answer at this stage to shape it, not much more precision than that.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

That's very helpful. Thank you so much, guys, and congrats.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Thank you.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Thank you.

Operator

Thank you. Our next question is from Tore Svanberg with Stifel. Please proceed.

Tore Svanberg
Tore Svanberg
Managing Director at Stifel Financial

Yes, thank you and congratulations on the results. For me, you talked about edge infrastructure, and and I'm sure this is something that you're gonna continue to elaborate on. But could you just explain a little bit, you know, what you mean by that? Obviously, we're not talking about, you know, big AI clusters here. So, yeah, if you could just add some color on on what exactly you mean by, introducing new products for edge infrastructure.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Right. So I think, you know, if you look at the the how the device being distributed, on the top is really a data center and cloud. On the bottom is really the h endpoints, which is where we are having serving our customer. But now become it's become clear with so many different of the various AI models happening, and you just cannot upgrade to the endpoints faster enough. Right?

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Of course, that our customer continue want to replace the endpoints with new new new products or new cameras that we can can run efficient events AI models. But to upgrade the existing install base, you you can imagine that there's a you want to integrate multiple endpoints that already in the install base and using a a a server or AI box that can integrate all of those endpoints, video input, and run the best model on that box. Right? So that could that'd be the easiest way to upgrade the install base. And I I think that's become a trend.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

It become obvious. And among other things, this is just one early trend that we're seeing, and we believe that has momentum on that. And in the future, there will be many other, you know, on premise servers edge servers that walk and use our solution to.

Tore Svanberg
Tore Svanberg
Managing Director at Stifel Financial

Yeah. That that's great color. And and as my follow-up, you know, I know your segment revenue is in IoT versus auto, but it it sounds like, you know, non camera IoT is really starting to proliferate here with, you know, IoT, industrial enterprise wearables and so on and so forth. Is is that business sort of approaching 10% of revenue? And, you know, will you potentially eventually, split that out, you know, so that you don't just sort of have investors focus on the security camera part of the of the revenue?

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Couple things there, Tory. It's Lewis. You know, most of our revenue today, you know, the data is getting ingested by our AI accelerator through the lens of a camera. So, you know, that hasn't changed. Although, we have said it's likely that, that becomes an incremental opportunity for us in the future, especially as we go into the edge infrastructure.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

But, you know, Fermi made a comment in his scripts, you know, about security as an end market for us. And, you know, that's less than half of our revenue now. So now we're seeing, you know, very good growth. As you know, auto is, you know, around 25% of our revenue. And then in other IoT markets, we're starting to see solid growth there and adoption of AI in a wide variety of markets.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

So everything is still ingesting data through the lens of a camera, but that probably changes in the future. And security is, you know, ground zero for us because that's where AI at the edge started. You know, we led that market, and now we're leveraging that expertise and applying it to a lot of additional vertical applications.

Tore Svanberg
Tore Svanberg
Managing Director at Stifel Financial

That's a great perspective. Congrats again. Thank you.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Thank you.

Operator

Thank you. Our next question comes from Kevin Cassidy with Rosenblatt Securities. Please proceed.

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

Yes. Thanks for taking my question, and

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

I'll also congratulate on the great results. Speaking of those results, would you think with the strong product cycle that you're in is could there be a change in your seasonality, maybe as the the the human interface devices become less relevant in your revenue?

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Yeah. You are asking about the our CV products versus human viewing products?

John Young
John Young
Chief Financial Officer at Ambarella

Just a question with regard to whether our seasonality might not be as much of an impact.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Right. So I think for this year, I think with so many uncertainty on geopolitical situation, that seasonality is definitely a question mark for us. Although we are not saying there's no regular seasonality, we'll just say that we provide a much higher a much broader range for the annual guidance to indicate there's uncertainty on the on the second half. But I think there's definitely a scenario that normal seasonality can happen.

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

I see. And you've piqued our

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

interest with mentioning these new edge devices. And, you know, is it

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

these are all your transformer based SOC?

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Transformer based. Ahead.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Yes. I think the question was correct me if I'm wrong, Kevin. It was a little bit hard to hear you. On the edge infrastructure, is do we expect that market to leverage our third generation AI accelerator to a high degree? And the answer is yes.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Yes. Obviously, because right now, the first we already announced n y six five five this year for that particular market, but we we also understand the need for the customers who are gonna build another chip for the for the family of the product so we can deliver a full a a complete roadmap for the customer. All the chip we're talking about today is still leveraging our third generation CVflow architecture and the software to minimize our investment, but at the same time, provide a very competitive solution to in the market. And more importantly, I think, as you know, that third generation architecture can redo all of the advanced AI models based on transformers.

Kevin Cassidy
Senior Research Analyst at Rosenblatt Securities

Okay. Great. That's one of the exciting products. Looking forward to hearing.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Thank you.

Operator

One moment for our next question. It's from the line of Joe Moore with Morgan Stanley. Please proceed.

Joseph Moore
Joseph Moore
Managing Director at Morgan Stanley

Great. Thank you. Thanks for the update and the good numbers. As

Joseph Moore
Joseph Moore
Managing Director at Morgan Stanley

you talk about these kind

Joseph Moore
Joseph Moore
Managing Director at Morgan Stanley

of Edge II focus, I guess, this a shift in focus for you guys? And I guess, how are you thinking about the sort of more the CV three types of larger automotive ADAS opportunities? You know, are you moving resources maybe away from those things towards these other initiatives? Or are those initiatives still something that you're, you know, enthused about?

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

O auto is continued to be a focus. But I think, you know, with the the our current approach for auto is we only build a complete c v three automotive series. As you know, that we have a six eighty five, six five five, and the six three five that the complete line up for the autonomous driving software. And, also, we're to continue to invest on our software side both for the this lab, account driving software stack, and the ultralight radar software software stack. So that doesn't change.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

However, you know, with the the we finalized already CV three family for the automotive road map. We definitely have resources that we're going to put on the edge infrastructure. And, also, we talk about we, add another another project, which is not in our annual plan, but we think we saw our revenue growth. We have a chance to build another silicon for edge infrastructure, which we are doing. So we have definitely add a little bit more take fee to improve our our strength in this h infrastructure business.

Joseph Moore
Joseph Moore
Managing Director at Morgan Stanley

Okay. Thank you. That's helpful. And then I guess, you know, I know you don't like talking about this sort of more futuristic humanoid robots and things like that. But, you know, there's obviously a lot of kind of upfront investment in kind of paving the way to those types of markets, and you have technology that should be important.

Joseph Moore
Joseph Moore
Managing Director at Morgan Stanley

So just how do you kind of frame that? Is that is that an opportunity that you're willing to invest resources into?

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Yes. In fact, we are investing the resource. Let me maybe go a little bit deeper than than before. The way we look at robotic application today, we look at we we we view that market very similar to autonomous driving five years ago. What that means is that most of our customer, instead of trying to most find the most efficient solution, they are still trying to piece different pieces of the solution together to build a prototype because the the the size of the market for each customer is too small.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

So we are starting people trying to using a so one one box for the video perception, the other box for radar perception, and using a CPU to integrate them together. So this really reminds me five years ago, our the first generation of level two car coming out is a similar architecture. And we are back in that stage right now, and we already have solution like a c v five, c v seven to provide post a video perception and a RADAR perception for those kind of solution. But, however, we also believe just like the auto a time driving car, moving forward for the high volume robotic application, you need a domain controller and you need the end to end AI software to drive this application. So we're only we're gonna definitely using our CV three solution to compute drive this application.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

But everything we are doing for this h AI infrastructure, you can imagine that that also can help the robotic solution. But more importantly, if that's talking about silicon and sulfur, by really go to market, you're gonna start seeing maybe in the next quarter, we're just gonna start telling introduce an idea how we're going to change our go to market because we realized that, you know, in the past, we focus on addressing large customers. Now with the oh, it's a robotic application. The the custom is the market is very segmented. Most of customer has small volume, so we need to find a different approach, go to market approach to address this need.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

And we will, probably definitely start talking about that approach, next quarter.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Hey, Joe. It's Lewis. Just to wrap some part numbers around that. So for the co processing, you know, like, say, the perception, that would be parts like c v five or c v seven. And then, of course, the central brain, the domain controller for me was referring to would be like the end family of products.

Joseph Moore
Joseph Moore
Managing Director at Morgan Stanley

Great. Thank you so much.

Operator

Thank you. One moment for our next question. And it's from Suji Desilva with Roth Capital. Please proceed.

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Hi, Fermi, John Lewis. Congrats on the progress here. Maybe you can help me frame this Edge AI server opportunities. Is there a way to think about the size of that relative to maybe the end devices, some ratio, or some way to think about the content of these servers relative to the device content? Any way

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

to frame it so we

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

can think about how it's gonna grow in your revenue?

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Right. So, maybe, let me help you to the number I that I I'm thinking about. You know, if you look at the aggregate, the current camera space, that's using security camera as a as a example. There are roughly 1,200,000,000 installed base camera, which you need to be upgraded. Either upgrade by a new camera with advanced AI technology or upgrade with info the that's called h if h infrastructure box.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

And those kind of box usually integrate, I will say, a sixteen thirty two different cameras into a box. And the the content for that box for us is three digits and the low three digits. So that I hope that give you an idea of how we look at this smart market opportunity.

John Young
John Young
Chief Financial Officer at Ambarella

One thing I'd tack on there also is that, you know, having AI in the endpoint or in the edge infrastructure is not like a mutually exclusive thing. You can you can have AI in the endpoint along with the edge infrastructure servers.

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

No. That's great. Understood. And then my other question, around the edge infrastructure market as you're going into how does the competitive landscape maybe shift and some perspective there versus things like FPGAs, GPU CPUs that already target that market? Do you think about the competitive landscape differently or is it similar?

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Thanks.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

So

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

in that market, it's a very new market, you know, when you're looking at the near edge and the far edge, of the market. And so the same numbers like we're using are fairly small. So you do have some general purpose type processors used in these applications, you know, whether it's FPGAs or, of course, GPUs. We approach this market with, you know, much more efficient efficient solution when you measure it in terms of, like, performance per watt and consider thermal impacts on the total system cost. And so kind of the same, advantages that we've talked about in other markets will be applying to this edge market initially, say, the near edge.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

And your first question, you mentioned, you know, AI servers. You know, that's probably gonna be part of it too, but, maybe initially, you'll hear about the progress in some of the near edge markets first. Okay. In particular, those that use use cameras.

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Got it.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Mhmm.

Suji Desilva
Managing Director, Senior Research Analyst at Roth Capital Partners, LLC

Thanks, guys.

Operator

Thank you. Our next question comes from Quinn Bolton with Needham and Company.

Shadi Mitwalli
Equity Research Analyst at Needham & Company

It's Shadi Metwali on for Quinn. My first question is on some of the conversations you've had in regards to your customers' supply chain. I know last quarter, you mentioned customers evaluating their own supply chains, which has caused uncertainty in the back half of this year. So just curious on how these conversations have progressed.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Talking to our customer about about our supply situation. So we continue to have that conversation. You know, the one of the worry last time we talked about is whether we are our customer building up inventories. I think that we continue to have that conversation with customers. I all all of them told us that they are they are not building inventory.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

In fact, they are watching the situation, and that now they're really eager to build any inventory at this point. So from that point of view, I think we could feel comfortable with that. However, there's still always a geopolitical situation every day as we we know things can change. So that we we cannot speak for what we don't know in the next in the second half. So that's where uncertainty is.

Shadi Mitwalli
Equity Research Analyst at Needham & Company

Got it. And my follow-up is on gross margin. Sounds like some of your new CV chips have been tailwinds to ASP. However, gross margin is expected to decline next quarter. So I was just curious on what is driving the decline.

John Young
John Young
Chief Financial Officer at Ambarella

Yeah. It's a and I mean, from any quarter to quarter, it's really a combination of customers and product mix that that is the primary driver of of, you know, how that corporate gross margin rolls up. And so ordering patterns of different customers and and, you know, their contribution, that's that's really the, I guess, could say the primary driver for any one quarter's gross margin guide.

Shadi Mitwalli
Equity Research Analyst at Needham & Company

Got it. Thank you.

Operator

You. Our next question comes from Gus Richard with Northland Capital Markets. Please proceed.

Gus Richard
MD & Senior Research Analyst at Northland Capital Markets

Yes. Thanks for letting me

Gus Richard
MD & Senior Research Analyst at Northland Capital Markets

ask a couple of questions.

Gus Richard
MD & Senior Research Analyst at Northland Capital Markets

The video management systems that the 32 cameras or 60 and whatever are attached to, those are coming out with with, obviously, AI capabilities, and the camera has AI capabilities. And I was wondering if you could help me understand how that AI split happens and, you know, why you need it in both places.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

Right. So the the quick answer to that is, you know, with installed base, you just cannot replace all the installed base camera fast enough to the advanced AI cameras. So, you know, to enable the installed base with advanced AI models, you this box this kind of boxes is required and probably easiest way to upgrade. So that's just the first answer. The second answer is with a lot of different AI improvement every month or every quarter, I can imagine that in the future, you're continue to see more and more of this model coming up.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

The camera can run portion of it, but every time there's this camera comes out, it's easier to upgrade the service with a with a box approach. So I think the combination of this two really drive this the upgrade cycle.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

Hey, Gus. It's Lewis. Just to add some comments. John kinda touched on it earlier, but you could have, you know, c v two based, cameras in the field doing a detection and classification with CNN networks. And then you could provide an incremental layer of service with one of our Gen AI chips that could accommodate much larger parameter models, on the infrastructure infrastructure side, the point of aggregation.

Louis Gerhardy
Louis Gerhardy
Vice President, Corporate Development at Ambarella

And so, you know, maybe that's one example of how it would be architected.

Gus Richard
MD & Senior Research Analyst at Northland Capital Markets

Got it. And then just, you know, thinking about the market, know, at this point, China is not part of your market. And I was just wondering if you could, you know, comment on how big the not China market is, for security cameras and sort of what you see your market share is currently.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

You know, when we talk about our seven and ten numbers, we don't include China number anymore in any security card market. So that's where we're at. And in terms of market share, outside China, I I would say we definitely have a majority of the market share for the security camera in the middle mid and high end. On the low end side, there are plenty of Chinese and Taiwanese supplier try to compete with the low end with 2 to $3 chip, which we don't compete there. So if you look at the if you separate the line with the mainstream high end to the low to the low end, on the on the top, we are we are probably the majority leader.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

And on the bottom, you know, just we're just one of the players.

Gus Richard
MD & Senior Research Analyst at Northland Capital Markets

Got it. Thanks. That's helpful.

Operator

Thank you. And as a reminder to our teleaudience, if you do have a question, Okay. We have a question from the line of Martin Young with Oppenheimer. Please proceed.

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

Hi. Thank you for taking my question. First question is on the Edge AI infrastructure product. Is the second chip something new, meaning that you are pulling forward the development reacting to end market demand or something you have long planned in the in the road map?

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

It's a first case. In fact, that after we talked to so many customers and what they need, we realized that, you know, a one six five five is great for the first product, but we do need to have a second chip to come to keep competitive. And so I think that second chip but, however, the second chip is leveraging our current c v three our third generation c v four architecture and software. So the, the development is going to be fast, and also the cost will be, we think or can be easily controlled. But the add value is really helping customer have a better performance per watt and higher, higher performance in a in a sense silicon.

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

Got it. And then, in this quarter, accounts payable, trends little higher than normal. Is that associated with this new chip development?

John Young
John Young
Chief Financial Officer at Ambarella

Not specifically, Martin. No. It I I think, you know, as we started to to grow the the q two top line guide, it's really more a function of of building the inventory for to support the the demand that we're seeing. And so corresponding with that is the accounts payable associated with it.

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

Got it. Thank you. That's it for me.

Operator

Thank you so much. And ladies and gentlemen, this concludes the Q and A session. I will pass it back for final remarks.

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

And

Fermi Wang
Fermi Wang
Co Founder and CEO at Ambarella

thank you all for joining us today, and I'm looking forward to talk to you next time. Bye.

Operator

Thank you. And this concludes our program. Thank you for participating, and you may now disconnect.

Executives
    • Louis Gerhardy
      Louis Gerhardy
      Vice President, Corporate Development
    • Fermi Wang
      Fermi Wang
      Co Founder and CEO
    • John Young
      John Young
      Chief Financial Officer
Analysts
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Key Takeaways

  • Q1 revenue of $85.9 million beat guidance and rose 57.6% year-over-year, led by the hAI business.
  • AGI revenue accounted for over 75% of Q1 sales, marking the fourth consecutive quarter of record AI revenues and driving higher average selling prices.
  • Automotive revenue dipped low single digits sequentially despite a 20% year-over-year increase, while IoT applications grew mid single digits to nearly 75% of total revenue.
  • Full-year FY26 revenue guidance was raised to 19%–25% growth (~$348 million midpoint), with a wider range reflecting geopolitical uncertainty.
  • Ambarella is expanding into edge infrastructure with its N1 family and a new AI SoC supporting Gen AI models up to 34 billion parameters, targeting on-premise AI servers.
AI Generated. May Contain Errors.
Earnings Conference Call
Ambarella Q1 2026
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